• Total Revenue: $69.3 million, a decrease of 7% year-over-year.
• Recurring Revenue: $65.5 million, a 7% decline year-over-year.
• Provincial License Revenue: $1.7 million, up from $1.3 million in Q2 2023.
• Professional Services Revenue: $2.1 million, a 23% year-over-year decline.
• Overall Gross Margin: 70%.
• Product Gross Margin: 31%, or 75% when adding back depreciation and amortization.
• Operating Expenses: $37.9 million, or 55% of total revenue.
• Adjusted EBITDA: $13.6 million, 20% of total revenue, down from $16.6 million or 22% in Q2 2023.
• GAAP Operating Cash Flow: $5.5 million.
• Free Cash Flow: $5.2 million.
• Cash on Balance Sheet: Approximately $232 million as of June 30, 2024.
• Net Debt: Approximately $247 million.
• Gross Debt: Approximately $479 million.
• Interest Rate on Hedged Debt: 5.4% through August 2026.
• Interest Rate on Floating Debt: SOFR plus 385 basis points, 9.2% as of June 30, 2024.
• Stock Buyback: $3 million used to buy back approximately 1 million shares.
• Q3 2024 Revenue Guidance: $63.2 million to $69.2 million.
• Q3 2024 Adjusted EBITDA Guidance: $12.5 million to $15.5 million.
• Full-Year 2024 Revenue Guidance: $269.6 million to $281.6 million.
• Full-Year 2024 Adjusted EBITDA Guidance: $52.6 million to $58.6 million.

• Warning! GuruFocus has detected 5 Warning Signs with UPLD.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Upland Software Inc (NASDAQ:UPLD) exceeded its Q2 revenue and adjusted EBITDA guidance midpoint.
• The company reported core bookings in excess of core churn for two consecutive quarters, setting up for a target 3% core organic growth rate in 2025.
• Adjusted EBITDA increased sequentially from $13.1 million in Q1 to $13.6 million in Q2, with expectations for continued growth each quarter.
• Upland Software Inc (NASDAQ:UPLD) welcomed 155 new customers, including 17 major ones, and expanded relationships with 275 existing customers.
• The company earned 56 badges in G2's Summer 2024 market reports, up from 44 in the spring, indicating strong product recognition.

Negative Points

• Total revenue for Q2 was $69.3 million, representing a decrease of 7% year-over-year.
• Recurring revenue from subscription and support declined 7% year-over-year to $65.5 million.
• Professional services revenue saw a 23% year-over-year decline, consistent with the planned runoff of Sunset assets.
• Adjusted EBITDA margin decreased from 22% in Q2 2023 to 20% in Q2 2024.
• The company faces high private market multiples, making it challenging to pursue M&A opportunities.

Q & A Highlights

Q: Core bookings have exceeded core churn, again, as you note, but how far through the go-to-market changes is the Company now? A: John McDonald, CEO: We are about halfway through the process. We've implemented lead generation, lead qualification, demand gen teams, and upgraded our field sales force. We're seeing significant increases in pipeline generation and some larger sales, indicating the effectiveness of these changes. This progress sets us up to target a 3% core organic growth rate next year.

Q: Thoughts on the pace of roll-off of the Sunset assets and how should we model that? A: Michael Hill, CFO: We expect about $30 million of Sunset asset revenue in 2024, declining to around $17 million in 2025, and further down to $8-9 million in 2026. This is consistent with our previous guidance.

Q: What is the strategy for tackling the debt balance and refinancing as we approach 2025? A: John McDonald, CEO: We plan to refinance in the first half of 2025. Our focus remains on driving organic growth, margin expansion, and generating cash flow to pay down debt.

Q: Can you comment on sales cycles and any trends over the last 90 days? A: John McDonald, CEO: We have not seen a lengthening of sales cycles. In fact, we've closed some significant deals within the quarter. For AI-powered solutions, demand remains strong, and we haven't experienced any delays.

Q: How are you thinking about the pace of sales and marketing investments and their productivity? A: John McDonald, CEO: We are fully invested in our original plan, with no need to increase investment. We are seeing opportunities to better target our spending, and many of our marketing motions are becoming more efficient, contributing to margin enhancement.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.